eBay to axe 2,400 jobs in “compete and win” restructure, Q4 results weaker than expected

eBay is to cut 2,400 jobs, or 7% of its total workforce, in a major restructure as the online retail giant prepares to spin off its PayPal unit, it said late Wednesday. The job cuts will hit eBay’s three divisions: Marketplaces, Enterprise and PayPal. Its shares rose 2.6% in afterhours trading.

The reorganisation will return eBay to its roots with the Marketplaces division, the company said. It also plans to explore options to separate or sell the Enterprise division, which creates online sites for traditional retailers.

Enterprise, which includes its auctions and retail sales, accounted for nearly half its 2014 revenues.

“We will be simplifying organisational structures to focus the businesses and ensure that we are set up to compete and win,” said eBay.

It added: “Enterprise is a strong business and a leading partner for large retailers, managing mission-critical components of their e-commerce initiatives.”

CEO John Donahoe also said Wednesday the overall company is in “good shape” ahead of the reorganisation, which will spin off PayPal, which accounted for 44% of total revenues in 2014, in H2.

The moves come as eBay reported weaker than expected Q4 Christmas sales while forecasting sluggish revenue growth for the new Q1.

For the final quarter ended December 31, revenues increased 9% year-on-year to $4.9bn. Earnings, however, slipped to $936m/$0.75 per share, from $1.1bn/$0.90 a year ago.

But eBay’s commerce and payments systems continued to increase their roles in global commerce with mobile gaining share, the company noted.

Mobile payment volume grew 58% in Q4 totalling $45.6bn for the full year, representing 20% of total volume. Mobile commerce volume grew 30% in the final quarter totalling $27.9bn for the full year, representing 34% of total volume. Q4 cross-border trade grew 20%, representing 21% of total company ECV.

“In a year of unexpected events and distractions, we ended 2014 with double-digit revenue growth, solid earnings growth and strong cash flow, reflecting the fundamental strengths of our company,” Donahoe said in the statement.

“PayPal had another strong quarter, finishing an excellent year. eBay, while facing challenges, continues to be a great business and is focused on stabilising performance and engaging its core customers.”

• eBay also announced it has entered into a ‘standstill agreement’ with investor Carl Icahn, the company’s largest active shareholder. In addition to certain corporate governance provisions to be adopted by PayPal as an independent company at the time of its spin-off from eBay, the agreement also appoints Icahn Capital executive Jonathan Christodoro to eBay’s current board. The deal also includes limits on any ‘poison pill’ for PayPal that could block a proposed buyout. Icahn, meanwhile, said in a separate statement that Christodoro would “have the ability to transition to PayPal’s board once the spinoff occurs.”

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